Land to be valued as if minerals are privately owned

Alan specialises in NSW planning, environment and mining law and has extensive litigation experience, particularly in the NSW Land and Environment Court.

The Land and Environment Court has delivered a judgment about the valuation methodology to be used for valuing mining land under s 6A of the Valuation of Land Act 1916 (Valuation Act).

The Court found that the "land value" of land containing publicly owned minerals, as defined in the Mining Act 1992 (Mining Act), is to be determined on the assumption that the minerals are privately owned.

The judgment is likely to have implications for the minerals sector generally, including the coal sector.

The decision

The Court's decision turned on the expression, "the fee simple of the land" in s 6A.

The Court found that "land value" in s 6A means the value of "the fee simple of land", regardless of the extent of the estate of fee simple that has actually been granted. It means a hypothetical fee simple, being the highest estate in the land subject to no conditions or reservations.

For this reason, the Court found that the reservation of minerals to the Crown is to be ignored for the purpose of determining the "land value" under s 6A.

The effect of treating minerals as privately owned is that an assumed revenue stream under s 284 of the Mining Act must be brought to account when carrying out the valuation.

Under s 284, the owner of the land containing the minerals is entitled to seven-eighths of any royalty paid to the Minister under any relevant mining lease. This represents, in most cases, a substantial income stream that is likely to significantly increase the value of the land to a hypothetical purchaser.

The Valuer General's methodology for valuing mines to date has not taken account of this hypothetical income stream.

What does this mean for you?

The valuations prepared under s 6A of the Valuation Act are used for levying land tax and rates.

The Land and Environment Court's decision is likely to bring about significant changes in the way land valuations for mining land are done and consequential changes for how land tax and rates are levied on that land.

Mining companies will need to pay particular attention to the way their land is being treated to ensure that they do not end up paying unexpected amounts of land tax and rates.

This article was originally published in the June-July 2015 edition of Coalface Magazine. Please click here to view the PDF version of this article.